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Fun park owner could be a steady ride

Scott Phillips

Many Australians take time off between Christmas and February, and a fair proportion will arrive at some point at a theme park or bowling alley – and that's music to the ears of Ardent Leisure shareholders.

Ardent, which started life as a Macquarie satellite fund, owns and operates the Dreamworld and WhiteWater World theme parks in Queensland, as well as the SkyPoint observation deck at the Q1 building on the Gold Coast.

Around Australia, Ardent (ASX: AAD) is the owner and operator of AMF and Kingpin bowling centres, a group of marinas, a chain of health clubs and a chain of "family entertainment centres" in Texas.

If it's fun and costs money, Ardent wants to own and manage it – and really wants you to visit.

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A complicated structure

The company has had a strong run since 2004, growing revenue each year except 2010. Its profits have been somewhat erratic over that time, fluctuating between earnings of almost $50 million in 2007 and a loss of almost $1 million in 2009.

It also hasn't been shy in issuing new securities – having more than doubled them in eight years, which has eaten into per-security earnings.

As a stapled security – one Ardent Leisure security is really one share of the management company and one unit in a property trust – the reported earnings don't tell the full story.

Solid performance

Despite fluctuating bottom-line profits, Ardent has delivered solid and growing pre-tax earnings over the past four years – almost doubling in that time – and has paid a distribution yield of more than 9 per cent in each of the past five years.

The share price has continued to rise over the past 12 months, but the yield is still a trailing 8.2 per cent (although unfranked).

As consumers start to spend again, and if (and it's a big if, at least in the short term) the Australian dollar falls, making overseas holidays more expensive, Ardent stands to benefit from the reversal of some strong headwinds into beneficial tailwinds.

The company does carry a significant debt load, but if it can keep it under control, and continue to grow sales and earnings (and harness whatever macroeconomic benefits come its way), Ardent should be able to continue to turn in a solid performance for investors.

Foolish takeaway

On a trailing price-earnings multiple of only 11.2, Ardent isn't particularly expensive, and with solid (if unspectacular) expectations for earnings growth in the current and next years, Ardent might well be worth a look – or at least some family "research" at one of its theme parks this summer!

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Scott Phillips is a Motley Fool investment analyst. You can follow Scott on Twitter @TMFGilla. The Motley Fool's purpose is to educate, amuse and enrich investors.

This article contains general investment advice only (under AFSL 400691).